a primer on private equity at work.pdf

A Primer on Private Equity at Work Management, Employment, and Sustainability Eileen Appelbaum and Rosemary Batt February 2012 Center for Economic and Policy Research 1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009 202-293-5380 CEPR A Primer on Private Equity in the U.S.  i Contents Executive Summary 1 Introduction 4 The Institutional Environment 4 Financial Regulation 5 Labor Market Regulation8 Private equity: Origins, Growth, and Business Model 9 Emergence of Private Equity9 Size, Scale, and Scope of Private Equity in the U.S11 The Private Equity Business Model 13 The Private Equity Model in Retail 15 Sources of Private Equity Gains 16 Private Equity and Employment: What Does Research Show? 17 Management and Employment Relations 20 Private Equity in the Post-crisis Period 22 Performance of Private Equity Funds 24 Risk of Bankruptcy of Portfolio Companies 27 Investment in Private Equity by Hedge Funds and Sovereign Wealth Funds 29 Hedge Funds 30 Sovereign Wealth Funds 30 Private Equity’s Challenges 32 Conclusion and Recommendations34 References 37 About the Authors Eileen Appelbaum is a Senior Economist at the Center for Economic and Policy Research in Washington, D.C. and Rosemary Batt is the Alice Cook Professor of Women and Work at Cornell University, ILR School, in Ithaca, N.Y. Acknowledgments The authors thank Jae Eun Lee for her very able research assistance and the Russell Sage Foundation for financial support. CEPR